At their inception, employee benefits were considered “fringe benefits,” a mere afterthought to cash wages. Employers who were concerned about their employees’ welfare, of their own accord, handed out “fringes” to them. As time has gone by, however, these benefits have evolved into a significant portion of a worker’s total official compensation package, sometimes making up as much as 35% or more.

In their book Compensation, authors Milkovich, Newman, and Gerhart provide their definition of employee benefits within a total employee compensation package as “all forms of financial returns and tangible services and benefits employees receive as part of an employment relationship.”1

Others have offered separate definitions for employee benefits, including programs financed by employers that cover situations such as death, accidents, sickness, retirement, or employment.

A broader definition states that employee benefits include all services outside of cash wages, received by a worker from their employer directly or through outside agencies.

The broadest categorization of benefits, therefore, would resemble the following list:2

Legally required governmental programs

Social Security

Medicare

Unemployment compensation

Workers’ compensation

Temporary disability insurance

Company-sponsored loss-exposure insurance and retirement benefits

Death

Disability

Long-term care protection

Medical care

Dental benefits

Group Legal benefits

Property and liability insurance

Payment for time not worked

Vacation

Holidays

Jury duty

Maternity/paternity leave

Reserve/National Guard duty

Military leave

Additional cash payments

Educational assistance

Moving expenses

Suggestion awards

Christmas bonuses

Additional services

Subsidized cafeterias

Employee discounts

Wellness programs

Employee assistance programs

Daycare services

Adoption assistance

Financial planning assistance

Retirement counseling

Free parking

Functional Categories of Employee Benefits

The categorization laid out in the preceding list is too broad and covers many items and services that are not within the purview of this book. However, you can see that employee benefits cover many individual plans, as outlined.

The broader categories of these plans can be grouped as follows:

Legally mandated plans such as Social Security and other government programs

Private plans sponsored by employers, either exclusively paid for by employers or fully/partially paid by employees

Payments for time not worked, such as paid rest, sick leave, maternal/paternal leave, and vacation time, among others

This book focuses primarily on the second category of benefits (private plans sponsored by employers) because the bulk of expenses rests in this category. This book covers the accounting, finances, and related subject matter, as delineated in the preface.